Article- Navigating the Tracks: A Comprehensive Valuation of Indian Railway Stocks

Navigating the Tracks: A Comprehensive Valuation of Indian Railway Stocks

Investing in stocks, demands a careful analysis of various factors, and the Indian Railway sector, a cornerstone of the nation’s infrastructure, has garnered significant attention from investors. This article aims to provide an overview of the key considerations in the valuation of Indian Railway stocks, exploring the factors that can influence investment decisions in this dynamic sector.

Understanding the Indian Railway Sector:

The Indian Railway network is one of the largest and busiest in the world, connecting diverse regions and facilitating the movement of passengers and freight. As a vital component of the country’s transportation infrastructure, Indian Railway stocks attract attention from investors seeking exposure to a critical sector with potential for growth and stability.

1. Revenue Streams:

Indian Railways generates revenue through various channels, including passenger fares, freight services, and ancillary businesses. Understanding the contribution of each revenue stream is crucial for evaluating the financial health of the railway companies.

2. Freight Operations:

Freight transportation forms a significant portion of the Indian Railways’ revenue. The valuation of railway stocks should consider factors such as the volume of freight transported, pricing strategies, and the efficiency of logistics operations.

3. Government Policies and Regulations:

Government policies and regulations play a pivotal role in the railway sector. Changes in policies related to tariffs, subsidies, and infrastructure development can impact the financial performance of railway companies. Investors need to stay informed about government initiatives and their potential effects on the sector.

4. Infrastructure Investments:

The valuation of Indian Railway stocks is closely tied to the sector’s infrastructure development. Investments in new tracks, electrification, modernization, and technology adoption can enhance operational efficiency and contribute to long-term growth.

5. Operational Efficiency:

Efficient operations are critical for the profitability of railway companies. Factors such as on-time performance, maintenance practices, and the adoption of technology for scheduling and tracking can influence the overall operational efficiency of the railway network.

6. Competition and Market Share:

The railway sector in India faces competition from other modes of transportation, such as road and air. Evaluating the market share of Indian Railways and its ability to compete with other transportation modes is essential for understanding the growth potential and sustainability of railway stocks.

7. Financial Health and Debt Levels:

Analyzing the financial statements of railway companies provides insights into their financial health. Investors should pay attention to factors such as debt levels, liquidity, and profitability when assessing the stability and risk profile of railway stocks.

8. Technological Advancements:

The adoption of new technologies, such as automation, digitization, and electrification, can impact the efficiency and cost-effectiveness of railway operations. Evaluating a company’s commitment to technological advancements is crucial for predicting its future competitiveness.

The National Rail Plan (NRP) 2030

₹5,400,000 crore (equivalent to ₹57 trillion or US$720 billion in 2023)

The Indian government has ambitious plans for the development of the Indian Railways in the next 10 years. The National Rail Plan (NRP) 2030, which was released in 2020, outlines a vision for a “future-ready” railway system that is able to meet the growing demand for passenger and freight transportation.

The NRP 2030 has five key objectives:

To increase the modal share of railways in freight to 45%.

To develop capacity ahead of demand, which will cater to growing demand up to 2050.

To improve the quality of service and passenger experience.

To make railways financially sustainable.

To make railways more environmentally friendly.

To achieve these objectives, the NRP 2030 envisages a number of key initiatives, including:

Capacity expansion: The NRP 2030 targets to increase the railway network length from 68,000 km to 115,000 km, including new lines, doubling of existing lines, and electrification of the entire network.

Development of dedicated freight corridors (DFCs): The NRP 2030 targets to complete the construction of the two existing DFCs and develop new DFCs to connect major economic centers.

Development of high-speed rail (HSR): The NRP 2030 targets to develop a network of HSR corridors to connect major cities.

Modernization of signaling and telecommunications systems: The NRP 2030 targets to modernize the signaling and telecommunications systems to improve safety and efficiency.

Introduction of new technologies: The NRP 2030 targets to introduce new technologies, such as artificial intelligence, big data, and the Internet of Things, to improve the efficiency and performance of the railway system.

The government has already made significant progress in implementing the NRP 2030. For example, the Western Dedicated Freight Corridor (WDFC) has been completed and commissioned, and the Eastern Dedicated Freight Corridor (EDFC) is expected to be completed in the next few years. The government has also launched a number of new HSR projects, including the Mumbai-Ahmedabad HSR corridor and the Delhi-Meerut RRTS corridor.

The successful implementation of the NRP 2030 will have a major impact on the Indian economy and society. It will make the railway system more efficient and reliable, which will boost trade and commerce. It will also create new jobs and opportunities, and improve the quality of life for millions of Indians.

Here are some of the specific railway projects that are expected to be completed in the next 10 years:

Completion of the Eastern Dedicated Freight Corridor (EDFC)

Completion of the Mumbai-Ahmedabad High-Speed Rail Corridor

Completion of the Delhi-Meerut Regional Rapid Transit System (RRTS)

Doubling of railway lines on key routes

Electrification of the entire railway network

Modernization of signaling and telecommunications systems

Introduction of new train sets with improved passenger amenities

Development of new railway stations and terminals

Metro Network

22 Cities, 851 km Of Operational Network, And Another 675 km Under Construction, By 2024, India is set to become one of the largest metro networks in the world. With a commitment to convenient, eco-friendly transportation and enhanced urban living, India is set to elevate its metro network from 851 km to an extensive 1,985 km; this visionary plan will represent an investment of Rs. 6,838 billion in the next 5 to 7 years. Compared to the past, India added about 20-25 km annually, but with this, it is poised for an ambitious expansion of 175-200 km annually. While this is a significant achievement, The future of India’s metro network is not just about the country’s commitment to developing its infrastructure or Connecting cities; it’s about connecting people, opportunities, and a sustainable future.


As of December 2023, Indian Railways has a massive capital expenditure (capex) plan of Rs. 2.4 lakh crore (around $30 billion) for the next five years.

This translates to a significant amount of ongoing and upcoming projects across various areas:

New Lines & Gauge Conversion: Over 12,000 km of new lines and 5,000 km of gauge conversion are planned, improving connectivity and speed.

Station Redevelopment: Hundreds of stations are set for upgrades, creating modern facilities and enhancing passenger experience.

Electrification: Widespread electrification is underway to increase energy efficiency and reduce carbon footprint.

Dedicated Freight Corridors: Dedicated freight corridors are being built to boost freight transport efficiency and reduce congestion on passenger lines.

Rolling Stock Modernization: Upgradation and procurement of new locomotives, coaches, and wagons are ongoing to improve quality and safety.

The focus on infrastructure development and modernization bodes well for the future of Indian Railways and the companies involved.

Why are railway stocks in demand?

(1) Very low operating cost

Railways are seen as a forever cash-rich business as they don’t need to generate huge revenues to be profitable. This is because the inventory they use just needs a bit of maintenance and they have a low operating cost. Moreover, during a recession, the freight charges of waterways or airways might still be costlier than a train. Because of these reasons, the railway sector can easily survive amidst an economic downturn. If we take an example, during the Covid 19 pandemic the freight loading increased by 18% which proves that during economic downturns railway freights are still a preferable mode of transport.

(2) Entry barrier

In India, railways have a monopoly. It is nearly impossible for a new competitor to enter into the markets. That’s because laying tracks and buildings, such a wide network would need a huge investment. Moreover, as railways have no other competitor, they also have the pricing power in their hands. So even if they charge a higher price for their services, you have limited options to switch.

Titagarh Wagons

This 26-year-old Kolkata-based company has a 25% market share in the wagon-making business. In fact, it’s the largest in India now. If you had the foresight to see this massive rail expansion happening, you might have been laughing your way to the bank now instead of reading this…because Titagarh Wagons have had a rip-roaring 3 years.The stock has delivered a staggering 850% return! It’s insane. Now Titagarh Wagons isn’t really an overnight success. The group began operations in the early 1980s. And it started off by manufacturing railways-related stuff that was at the bottom of the value chain — things such as bogies which are like chassis and couplers that connected wagons. Back in those days, the company was called Titagarh Steels. Fun Fact: If you’re scratching your head thinking aren’t bogies the same as railway coaches? Well, in India, yes. We somehow started referring to coaches as bogies. In the rest of the world, bogies are simply a part of the wheel system. And that was just the beginning.Its wagon-making capacity was rising each year. But then, Titagarh Wagons also thought, “Why should we stop at just wagons?”After all, it had moved from bogies and couplers to freight wagons. So it began to put in place its diversification plan. It struck an international deal — the acquisition of an Italian company Firema in 2015. And this was the boost Titagarh needed to foray into the passenger rail segments. And hey, if metros are looking at not just function but aesthetics, then Titagarh Wagons could be a clear winner. Apparently, it’s the only one in India that can manufacture both aluminium and stainless steel coaches. Also, its role doesn’t end with manufacturing. It still needs to ensure train maintenance for the next 35 years. And that’s a nice chunk of recurring revenue for Titagarh Wagons too.And it’s not stopping. It’s thinking, “Alright, wagons and coaches are cool. But what’s next?”The answer — wheels. See, India has mostly been dependent on China to get wheels for its trains. But it wants more localized production. And Titagarh collaborated with R K Forgings to set up a joint venture to manufacture wheelsets. They’ve already won a bid to supply 1.5 million forged wheels to the Indian Railways over a 20-year period.And to do all this, Titagarh Wagons is splashing the cash to expand capacity in the next 2–3 years.It’s spending ₹100 crores on increasing its annual manufacturing capacity for wagons from 8,400 units to 12,000 units. It’s setting aside ₹200 crores to help it increase coach manufacturing from 250 to 850 per year. This facility will be dual use — both for the Vande Bharat line of trains and metros. And of course, another ₹200 crores on the factory for wheels.The kicker — all this growth is without much debt on its books.

#PittiEngineering is one of the companies which can benefit big time from the increased capex for railways.It manufactures value added and unique components through machining and lamination process for several end-user industries in India and international markets.Pitti Engineering makes customised products for customers. As a result, it became the only supplier for those products which established its long term relationship with counterparties. Some of them include General Electric, Siemens, ABB India, Cummins India, among others.In the railway segment, Pitti Engineering supplies components for most of the products that Indian Railways uses in terms of freight locomotives, electric freight locomotives, and passenger trains.The company has registered strong growth in revenues and profits on the back of an improvement in total capacity.In FY23, the company is undertaking a capex of Rs 1 bn. It has other capex plans lined up too. It will spend Rs 2.7 bn on production capacity at its Aurangabad facility. Once this is done, it will take up an additional capex of close to Rs 2 bn between 2024-25.Some construction got delayed in the second quarter of 2023. Its order book also declined marginally, but still stands at Rs 8.8 bn.

RVNL order book = Rs 70,000 crore (March 31, 2023)

Rail Vikas Nigam Targets Orders Worth Up To Rs 1 Lakh Crore In Next One Year

IRCON total order book position stood at Rs 32,486 crore

RITES order book = ₹5870 crore as on March 31st, 2023

Titagarh Rail Systems Ltd Order book Rs 27,000 crore

RailTel order book = ₹ 38.95 Cr dated 03.04.2023

Jupiter Wagons order book to exceed Rs 4,000 crore

Texmaco = order book is close to ₹9,000 crore

Revamping of Indian railway and its long term impact on logistics and public transportation

The Indian railway system is one of the largest in the world, and has recently undergone a significant revamp aimed at improving logistics and public transportation. The modernization of the railway system is expected to have long-term impacts on both the economy and society as a whole.

One of the key areas of improvement in the railway system is the introduction of high-speed trains. The government has been investing heavily in the development of high-speed rail corridors, which are expected to significantly reduce travel times and improve connectivity between different parts of the country. This can have a positive impact on logistics, as faster transport times can lead to reduced delivery times, lower inventory costs, and increased efficiency in the supply chain.

Another area of focus has been the introduction of modern technology and digitalization in the railway system. The government has launched several initiatives aimed at digitizing the railway system, such as the development of a centralized online platform for ticketing, and the installation of modern signaling systems. This can lead to improved safety, increased efficiency, and better customer service.

Moreover, the revamp of the railway system is expected to have a significant impact on public transportation. The introduction of high-speed trains, modern technology, and digitalization can make rail travel a more attractive option for commuters, thereby reducing the burden on road transportation and improving overall traffic conditions.

Additionally, the railway system can serve as a catalyst for the development of the local economy. The expansion of railway infrastructure can lead to the development of new industries and businesses, and improved connectivity can facilitate the movement of goods and people, leading to increased trade and tourism.

In conclusion, the revamp of the Indian railway system has the potential to significantly improve logistics and public transportation in the country. The introduction of high-speed trains, modern technology, and digitalization can lead to improved efficiency and reduced travel times, while also having a positive impact on the local economy.

Success of Vande Bharat

Vande Bharat Express, also known as Train 18, is India’s first indigenously developed semi-high speed train, which has been designed and manufactured entirely in India by Indian Railways’ Integral Coach Factory (ICF) in Chennai. The train has been a significant success for Indian Railways for several reasons:

Speed and Efficiency: Vande Bharat Express has been designed to run at a top speed of 160 km/h, making it one of the fastest trains in India. It has reduced travel time between Delhi and Varanasi by around 40% compared to other trains. The train’s energy-efficient design also helps reduce carbon emissions.

Modern Amenities: Vande Bharat Express is equipped with several modern amenities, including comfortable seating, onboard Wi-Fi, GPS-based passenger information system, and bio-vacuum toilets. The train also has a world-class exterior design and aesthetic appeal.

Made in India: Vande Bharat Express is a testament to India’s capabilities in manufacturing and innovation.

The train has been designed and manufactured entirely in India, using indigenous technology and expertise, thus promoting the “Make in India” initiative.

Passenger Comfort: Vande Bharat Express provides a superior travel experience for passengers, with features such as comfortable seating, ample legroom, and reduced noise levels.

he train’s modern amenities and spacious interiors provide a comfortable and hassle-free travel experience.

Overall, Vande Bharat Express has been a significant success for Indian Railways, demonstrating the country’s capabilities in manufacturing and innovation. The train’s speed, efficiency, modern amenities, and comfort make it a preferred mode of transport for many passengers, and it has helped boost the Indian Railways’ image and reputation globally.

India’s bullet train project

India’s bullet train project, officially known as the Mumbai-Ahmedabad High-Speed Rail (MAHSR) project, is a joint venture between the Indian and Japanese governments. The project aims to build a high-speed rail corridor between the cities of Mumbai and Ahmedabad, covering a distance of approximately 508 km.

The bullet train will run at a speed of 320 km/hour and will reduce the travel time between the two cities from the current 7-8 hours to just 2 hours. The estimated cost of the project is around Rs 1.1 lakh crore ($15 billion) and is expected to be completed by 2028.

The project will require the acquisition of over 1,400 hectares of land and will pass through 12 stations, including Mumbai, Thane, Virar, Boisar, Vapi, Bilimora, Surat,Bharuch, Vadodara, Anand, Ahmedabad, and Sabarmati.

The bullet train will use the Shinkansen technology, which has a proven track record of safety and reliability in Japan. The project is expected to boost economic development in the region and create job opportunities.

However, the project has faced criticism from some quarters, who argue that the cost of the project is too high and that the funds could be better used for other infrastructure projects. There have also been concerns about the environmental impact of the project and the displacement of people living in the area.

India revamping it’s railway stations

India is revamping its railway stations as part of its efforts to modernize and upgrade its railway infrastructure. The Indian Railways, which is the fourth-largest railway network in the world, has over 7,000 railway stations, many of which are old and outdated.

Under the Indian government’s ambitious program called the “Station Redevelopment Program,” more than 400 railway stations are being revamped to provide modern amenities and facilities to passengers.

The program is being implemented through a public-private partnership model, where private companies are being invited to participate in the redevelopment of railway stations.

The revamped railway stations will have features such as escalators, lifts, modern toilets, waiting lounges, food courts, and retail shops. They will also have facilities such as Wi-Fi, digital display boards, and CCTV cameras for better security.

The revamping of railway stations is also expected to create job opportunities and boost economic development in the surrounding areas.

The Indian government has set a target of redeveloping 100 railway stations per year under this program.

The program has already led to the redevelopment of several railway stations, including Habibganj in Madhya Pradesh, Gandhinagar in Gujarat, and Anand Vihar in Delhi.

The revamping of railway stations is part of the Indian government’s larger plan to modernize and upgrade, the country’s railway infrastructure, which is seen as essential for economic development and improving connectivity within the country.

Benefits of revamping railway infrastructure

Revamping railway infrastructure can bring several benefits to a country, including:

1. Improved safety: Modernizing railway infrastructure can improve safety by reducing the risk of accidents and incidents. Upgraded tracks, signaling systems, and rolling stock can all contribute to a safer rail system.

2. Increased capacity: Modernized rail infrastructure can also increase the capacity of the railway network, allowing more trains to run on existing tracks and reducing congestion.

3. Improved efficiency: Upgraded rail infrastructure can also improve the efficiency of the railway system by reducing travel time, improving on-time performance, and reducing delays.

4. Boost to the economy: Improved rail infrastructure can contribute to economic growth by improving connectivity between different regions, reducing transportation costs, and enabling the movement of goods and people more efficiently.

5. Environmental benefits: Rail transportation is generally considered to be a more environmentally friendly mode of transportation than road or air. Upgraded rail infrastructure can help reduce carbon emissions and contribute to a more sustainable transportation system.

6. Improved passenger experience: Upgraded railway stations and facilities can improve the passenger connectivity, and a more comfortable and convenient travel experience.

Overall, revamping railway infrastructure can bring significant benefits to a country, including improving safety, increasing capacity, boosting, the economy, and contributing to a more sustainable transportation system.

Conclusion: A Journey of Informed Investment

Investing in Indian Railway stocks requires a holistic understanding of the sector’s dynamics, economic indicators, and government policies.

As India continues to invest in its infrastructure, the railway sector presents opportunities for growth. However, investors must conduct thorough research, stay informed about industry developments, and consider the broader economic context to make well-informed decisions.

In the intricate landscape of the Indian Railway sector, a balanced evaluation of revenue streams, infrastructure investments, regulatory factors, and operational efficiency will guide investors on a journey towards sound investment decisions.

Remember, the valuation of stocks is a dynamic process that necessitates continuous monitoring and adaptation to changing market conditions.


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Maulik Suthar,
Managing Director,
Orange Holdings